141 N. Glendale Ave., Suite 346 Innovation, Performance and Audit Glendale, CA 91206 Department glendaleca.gov REPORT#: 2018-03 February 7, 2018 Onnig Bulanikian, Director Community Services and Parks Department Re: Community Development Block Grant (CDBG) – Financial Ratio Calculation Dear Onnig, In accordance with Internal Audit’s fiscal year 2017-18 audit work plan, Internal Audit calculated financial ratios for the CDBG community agency applicants as reflected in Exhibit A, attached. These ratios were computed from the financial statements submitted by fiscal year 2018-19 CDBG applicants and furnished to Internal Audit by department management. No additional procedures were performed by Internal Audit to verify the accuracy of the financial information received. Internal Audit has taken care in selecting ratios to calculate that are practical for operations in a non-profit environment. The ratios presented are meant to provide the CDBG Advisory Committee with an additional tool to utilize while deliberating on funding decisions for the coming year. It is important to note that by calculating the financial ratios, Internal Audit is not expressing an opinion on the financial health of any agency requesting funding. Descriptive information and the standard formula for each ratio calculated are shown in the following table: Financial Ratio Standard Formula Description Reflects the organization’s ability to meet short term obligations. Current Ratio A ratio of 1 or greater is a good sign suggesting that an entity would be able to pay off its obligations if they came due. Financial Ratio Standard Formula Description Reflects the proportion of debt an organization has relative to its assets. It works opposite of the current ratio. Debt Ratio A ratio of less than 1 is a good sign which indicates that an organization has less debt than assets. Reflects the number of months that the organization could operate if funding stopped and no additional funds were Defensive received. Interval A higher ratio reflects an expected longer period of operation if funding were to stop. Reflects the percentage of funds being spent on non-program related expenses Functional Cost such as general and administrative costs. Allocation A lower % indicates the entity is paying more on program related expenses. Reflects the average dollar raised from each dollar spent on fundraising. Fundraising Efficiency A lower amount indicates the entity is paying more in relation to the contributed income received. Identifies the potential risk as a % if the largest source of revenue were eliminated Reliance on or reduced. Source Income A lower % indicates less risk if the largest revenue source was eliminated. Financial ratios are often used for quantitative analysis as a means to gain general information on the financial position of an organization, however, ratios do not provide a complete indicator of financial stability or performance of an organization and should not be evaluated on a stand-alone basis. Exhibit A Functional Financial Defensive Reliance Current Debt Cost Fundraising CDBG Applicant Name Stmt Interval Source Ratio Allocation Efficiency Year End Ratio (months) Income Ratio Adventist Health 12/31/16 2.94 1.28 5.41 14% * 94% All for Health 7/31/16 7.30 .19 2.80 15% $27.38 81% Armenian Cultural 7/31/16 2.91 1.32 6.50 37% $3.12 34% Foundation Armenian Relief Society of 6/30/17 6.39 .19 3.64 8% $223.96 90% Western USA, Inc. Ascencia 6/30/17 3.22 1.15 4.04 18% $10.40 68% Catholic Charities of Los 6/30/17 6.29 .44 8.09 10% $155.87 36% Angeles, Inc. Committee for Armenian 6/30/17 121.16 .01 4.27 34% $34.11 59% Students in Public Schools Glendale Youth Alliance, 6/30/16 1.58 1.72 2.57 24% $75.82 42% Inc. Homenetmen Glendale 11/30/16 7.11 .88 6.51 17% $3.66 56% Ararat Chapter Housing Rights Center, 6/30/16 10.68 .10 7.86 2% * 86% Inc. The Salvation Army, Western Territory, 9/30/16 2.99 .43 2.15 20% $4.92 29% Southern California Division YWCA of Glendale 6/30/16 5.64 .49 5.52 30% $11.46 61% * Fundraising expense not identifiable in financial statements resulting in no value for ratio calculation. .